US Cyber Liability Market Continues to Grow

Highlights:

• There has been a 16% increase in cyber insurance claims and just a modest reduction in the loss ratio.
• The market for cyber insurance alone in the United States is considered worth up to $3.5 billion yearly.
• MarketsandMarketsTM predicts that the cyber insurance market will grow at a rate of 21.2 percent per year, from $7.8 billion in 2020 to $20.4 billion by 2025.

In 2021, the US Cyber Liability market saw an increment of 75% in direct premiums. During the first half of 2022, the cyber insurance market “continued to correct,” with rates rising by at least 60% for ideal risks and by at least 100% for less ideal or challenging risks, according to USI’s 2022 Commercial P&C Market Outlook Mid-Year Addendum.
This growing trend of cyber insurance has made it the fastest-growing segment in the P&C insurance sector.

The surprising part is, despite the consistent spike, there has been a 16% increase in cyber insurance claims and just a modest reduction in the loss ratio, according to an AM best report. Cyber supplement data states that the industry’s yearly reported claim filings have doubled over the last three years. Direct incurred losses and defense and cost containment (DCC) costs for standalone cyber coverage have increased by over 300 percent since 2018. Even so, earned premium growth outpaced changes in losses suffered in 2021, and the standalone cyber loss ratio decreased from 72% to 65%

This consistent growth can be because more firms recognize the need for protection against monetary and reputational damages due to security breaches and cyber assaults. Despite being in its infancy, the market for cyber insurance alone in the United States is considered worth up to $3.5 billion yearly. It is anticipated to increase by another $2 billion during the following three years. MarketsandMarketsTM predicts that the cyber insurance market will grow at a rate of 21.2 percent per year, from $7.8 billion in 2020 to $20.4 billion by 2025.

Per AM Best’s research, “US Cyber: The Hardest of the Property/Casualty Markets,” some of the growth in the cyber sector is being sparked by the general hardness of commercial insurance costs due to inflation fears and a general weakening of the investment market.

AM Best anticipates that the cyber market will remain challenging for some time as cyber-attacks become more sophisticated. Captives are an appealing risk management alternative for corporations due to the stiffening market and a lack of capacity.

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Sources

• Reinsurancene
• Fitch Ratings
• Insurance Journal
• AmTrust Financial